Contract Law By: Syed Aun Abbas Advocate LL.B, LL.M Discharge of Contract

Contract Law By: Syed Aun Abbas Advocate
LL.B, LL.M
Discharge of Contract
1) Introduction
A contract is said to be discharged when the obligations created by it come to an

end. In other words discharge of contract means ' termination of the contractual
relationship between the parties'. There are various modes of Discharge of Contract, a
contract may be discharged either in a positive way (Positive - by performance) or in
negative. (Negative - by breach or failure to perform contractual obligation by either of the
parties).
2) Discharge of contract -
There are various modes of discharge of a contract which are as follows:
1. By performance
2. By agreement or consent
3. By impossibility
4. By lapse of time
5. By operation of law
6. By breach of contract
1. By performance -
A contract is said to be discharged if the parties to a contract fulfill their obligations
arising under the contract within the time and in the manner prescribed. In such a case, the
parties are discharged and the contract comes to an end.
Performance of a contract is the most usual mode of its discharge. It may be Actual Performance
or attempted Performance (tender)
(a) Actual performance: When both the parties perform their promises, the contract is
discharged. Performance should be complete, precise and according to the terms of the
agreement. Most of the contracts are discharged by the performance in this manner.
(b) Tender or Offer of Performance: Tender or offer of performance means "offer made by
the promisor to promisee expressing his willingness to perform his part of the obligation under
the contract. It is also known as attempted performance.
Example-
'A' offers to sell his house to 'B' for $100000 and 'B' accepts the same letter 'B' paid the
amount in full and 'A' handed over the house to 'B'. Here the parties have fulfilled their
obligations. The contract is said to be discharged by performance.
If only one party performs the promise, he alone is discharged. Such a party gets a right
of action against the other party who is guilty of breach of contract.
2. Discharge by agreement or consent:
A contract rests on the agreement of the parties. As it is an agreement which binds them,
so by their agreement or consent they may be discharged.
A contract may be terminated by subsequent agreement. The new agreement may be by way of :
a) Novation- Contract Act deals with the doctrine of novation. When a new contract is
substituted for an existing one, either between the same parties or between the new parties. If the
parties to a contract agreed to substitute a new contract for it or to rescind or alter it, the original
contract need not be performed.
b) Alteration-. i.e., when one or more of the terms of the contract is/are altered by the mutual
consent of the parties to the contract.
c) Rescission- i.e., when all or some of the terms of the contract are canceled.
d) Remission- Contract Act 1872 speaks about the discharge of a contract by remission. i.e.,
acceptance of a lesser fulfillment of the promise made.
e) Waiver - which means intentional relinquishment or giving up of a right by a party entitled

thereto under a contract.
f) Merger- i.e., when an inferior right accruing to a party under a contract merges into a superior
right accruing to the same party under a new contract.
3. Discharge by Impossibility of Performance:

If the performance of a contract is impossible, it is void. In other words, the impossibility of
performance renders the contract void. Contract Act 1872 lays down the provisions relating to
the impossibility of performance, which runs as follows -
”An agreement to do an act impossible in itself is void." Impossibility which arises

subsequent to the formation of a contract (which could be performed at the time when the
contract was entered into) is called subsequent or supervening impossibility include-

a) destruction of the subject-matter of contract;
b) non-existence or non-occurrence of a particular state of things;
e) death or incapacity for personal service;
d) change of law or stepping in of a person with statutory authority;
e) outbreak of war. The contract is discharged in these case.
The following cases are not covered by supervening impossibility ;
a) difficulty of performance;
b) commercial impossibility;
c) failure of a third person on whose work the promisor relied;
d) strikes, lockouts and civil disturbances;
e) failure of one of the objects. The contract is not discharged in these cases.
4. Discharge by lapse of time:
In some cases law, imposed an obligation on the parties in respect of certain contacts to perform
within a specified. If a contract is not performed within the period of limitation and if no action
is taken by the promise in a law court, the contract is discharged.
5) Discharge by operation of law:
A contract may be discharged by operation of law.
It includes discharge by
a) Death
b) Merger
c) Insolvency/ Bankruptcy
d) Unauthorized Alteration of the terms of a written agreement, and
e) Rights and liabilities becoming vested in the same person.
f) Judgment of Court
6) Discharge by breach of Contract:
Breach of contract means failure to perform the contractual obligation by either of the parties

without any lawful excuse. It is a ground for discharge of the contract.
Breach of contract may be -
1) Actual breach, or 2) Anticipatory breach.

1) Actual breach of contract may occur a) at the time when the performance is due, or b) during
the performance of the contract.
2) Anticipatory breach of contract occurs when a party repudiates his liability or obligation
under the contract before the time for performance arrives.

Contract Law By: Syed Aun Abbas Advocate LL.B, LL.M Discharge of Contract

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What are the different modes of discharge of a contract?

What are the different modes of discharge of a contract?

What are the conditions required for discharge of a contract by impossibility of performance?

What are the conditions required for discharge of a contract by impossibility of performance?

Contract Law By: Syed Aun Abbas Advocate

A contract is said to be discharged when the obligations created by it come to an

2. Discharge by agreement or consent:

e) Waiver - which means intentional relinquishment or giving up of a right by a party entitled

”An agreement to do an act impossible in itself is void." Impossibility which arises

b) non-existence or non-occurrence of a particular state of things;

e) death or incapacity for personal service;

d) change of law or stepping in of a person with statutory authority;

e) outbreak of war. The contract is discharged in these case.

The following cases are not covered by supervening impossibility ;

c) failure of a third person on whose work the promisor relied;

d) strikes, lockouts and civil disturbances;

4. Discharge by lapse of time:

5) Discharge by operation of law:

A contract may be discharged by operation of law.

6) Discharge by breach of Contract:

Breach of contract means failure to perform the contractual obligation by either of the parties

Breach of contract may be -

1) Actual breach, or 2) Anticipatory breach.

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